It has been a challenging year for AED Oil Limited
(ASX:AED) , as we progress towards our goal of becoming a regional oil and gas company with a diversified asset portfolio. We now move to exploit the exploration potential and deliver producing fields.
AED’s strategy is to identify, explore, develop and commercialise high impact oil and gas opportunities in the Asia Pacific region.
Implementation of our strategy commenced by diversifying our asset base from the Australian Puffin and Talbot fields through investment into South East Asia.
AED Oil Limited
(ASX:AED) now has a portfolio of quality assets in recognised regions, including Brunei, Indonesia and Australia.
While the past few years have held many challenges for AED Oil Limited
(ASX:AED), we have maintained our focus on addressing these and continuing the core business of an oil and gas exploration and development company.
The AED Oil Limited
(ASX:AED) team has met these challenges head on and delivered significant changes in the strategic direction of the Company.
Fitting with that strategy, we have been pleased with our initial two well Phase 1 Exploration Program for Block L, Brunei and our assessment of the potential of Rombebai, in Indonesia, which may develop into a world class asset.
During the financial year AED Oil Limited
(ASX:AED) has continued to build, strengthen and increase the underlying value of your Company with the successful implementation of the above corporate strategies through:
-- Diversification – the diversification of its interests with investments in the Asia Pacific region with the acquisition of highly promising assets – 50% interest in Brunei (Block L), 100% interest in the Rombebai Contract Area, and a 60% interest in the South Madura Contract Area.
-- Capital management – the Statement of Financial Position has been strengthened with the restructuring of the existing convertible notes and by successfully obtaining two new financing facilities.
-- Puffin field – suspension of operations due to safety and operational issues allowing geophysical and geological analysis to commence with the view to establish a new Field Development Plan for the Puffin and Talbot fields.
The focus of our coming year is to advance exploration and move towards development of our Brunei and Indonesian projects. We will also continue to assess our Australian fields.
We have worked hard over the past 18 months to establish a strong balance sheet with significant cash reserves of over A$64 million, as at 30 June 2010, to ensure our operations progresses as planned.
The restructured balance sheet allowed the opportunity to position the Company to participate in diversification.
AED Oil Limited
(ASX:AED) has assembled a highly-motivated, energised and qualified management and personnel team. Having the right combination of technical and commercial expertise to support the development of our various projects, will continue to be a priority for AED Oil Limited
(ASX:AED).
We have strengthened our board through the appointment of two new directors - John Imle and Tim Baldwin.
John is an experienced Petroleum Engineer. He has held various senior positions with international energy companies and is currently Chief Executive Officer of the private Canadian company, Nations Petroleum Company Ltd (Nations). Nations, as a result of the Indonesian and Brunei acquisitions, has become a major shareholder in AED Oil Limited
(ASX:AED).
Tim has extensive commercial experience in the oil and gas industry having been with BP for over a decade. In 2008, he joined the Asia Resources Fund (ARF) and has been responsible for developing and managing oil and gas investment opportunities. ARF subscribed to the new 6% Convertable Notes in AED Oil Limited
(ASX:AED) which raised over A$20 million.
Subsequent to the Financial Year end, Pedro De Souza elected to resign his position as Managing Director and his Board directorships of AED Oil Limited
(ASX:AED) and its subsidiaries, affiliated or related entities, effective 18 September, 2010. Pedro’s vast experience in oil and gas exploration, appraisal, development and production has provided an enormous contribution to AED Oil Limited
(ASX:AED) . Pedro has been instrumental in the diversification of the Company into South East Asia and I wish to thank him for his contribution and his offer to continue his association with the Company in the future on an ‘as needed’ basis.
While AED Oil Limited
(ASX:AED) will continue to assess its Australian asset and potential development plans, our strategic direction in the short term is primarily centred on our onshore Brunei and Indonesian projects. As our activity increases significantly we seek to bolster our technical staff in our Brunei and Indonesian offices and will continue to review our needs in order to maintain the most appropriate organisational structure.
In terms of our operational staff, safety remains the priority at all of our operations and our performance for the year is a source of pride across the Company. We want our staff and contractors to come to work in a safe place and to go home to their families, where ever they are in the world, free of any incidents or accidents while at work.
Personally, I am very optimistic about the coming year for AED Oil Limited
(ASX:AED) , especially for our Brunei Block L project and at Rombebai, in Indonesia. While greater detail will be provided in the Operational Overview I would like to touch briefly on these projects.
Our confidence in Block L was displayed by our election to proceed with the Phase 2 exploration program, which was announced subsequent to the end of the financial year.
The decision to proceed to Phase 2 reflects AED’s view of its drilling results to date giving it confidence in the prospectivity of its Brunei acreage. In particular, AED has been encouraged by its drilling results at the Lukut-1 and the Lempuyang-1 wells and the acquisition, processing and study of further geological and geophysical data on Block L.
These results support AED’s views about the general attractiveness of Brunei and, in particular Block L, as an oil and gas exploration region.
The attractiveness of Block L as an oil and gas exploration region is based upon:
-- Brunei’s position as a historically proven oil and gas rich province and as Asia’s current third largest oil and gas producer;
-- Onshore acreage in Brunei, such as Block L, remains significantly underexplored with minimal exploration activity over the past 20 years and minimal application of recent technological advancements in both drilling techniques and seismic analysis;
-- Low drilling costs given the predominately onshore location of Block L and ready access to technical services and experienced contractors in Brunei; and
-- Excellent access to existing oil and gas infrastructure, which means the path to commercialisation for any discoveries will be relatively short and inexpensive.
Rombebai, in Indonesia, is a uniquely exciting prospect which could hold a world class, multi-trillion cubic feet (TCF) prospective resource. The Company is targeting a prospective resource in excess of seven TCF in-place gas with potential upside of over double this estimate.
The prospect has an excellent path to market with the potential to become a major liquefied natural gas development. New seismic data and interpretation work has identified the significantly increased prospectivity of the Gesa structure which is located onshore and close to the coast.
While the coming year is set to be a very busy time as we continue to assess and explore these projects, I must acknowledge the efforts exerted by the whole AED Oil Limited
(ASX:AED) team to date.
We continue to develop the AED Oil Limited
(ASX:AED) team and now have active offices in both Indonesia and Brunei. We actively seek to employ local people in those offices to ensure a correct approach to cultural sensitivities and to take advantage of existing talent when building our team.
I thank our team, located in Brunei, Jakarta and Melbourne, for their exceptional effort this year. The planning and implementation of the programs to date will allow us the best opportunities of success.
I would also like to thank AED’s shareholders for your confidence in our strategy.
I look towards the future of AED Oil Limited
(ASX:AED) with some confidence, encouraged by the Company’s achievements over the last year and with the evident potential identified by our Brunei drilling in mind.
David Dix
Executive Chairman & CEO
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